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πₜ, vₜ, and uₜ represent price inflation, wage inflation, and the unemployment rate at time t....

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Economics

πₜ, vₜ, and uₜ represent price inflation, wage inflation, and the unemployment rate at time t. We assume πˉ=0\bar{π} = 0πˉ=0. Remember to provide economic explanations, not just mathematical ones. We are given: vt=10−2utvₜ = 10 - 2uₜvt​=10−2ut​ and that when wages increase by 1 percentage point, prices increase by 0.8 percentage points. Write down the Phillips Curve. This is the reference Phillips Curve. Now assume that increases in foreign prices raise domestic price inflation by 5 percentage points. Write the new Phillips Curve and compare it to the reference Phillips Curve. An improvement in collective bargaining coverage means that wage inflation becomes half as sensitive to uₜ. Write this down and compare it to the reference Phillips Curve. A liberalization of labor market regulation causes z to fall such that now vt=6−2utvₜ = 6 - 2uₜvt​=6−2ut​. Write this down and compare it to the reference Phillips Curve.

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